Chapter 13 is a form of bankruptcy that provides a method of paying some debt while discharging other debt.  It is commonly used by debtors who are delinquent in home or car payments and need to catch up payment without losing the property; or those who fail to qualify for a chapter 7 bankruptcy under the means test of disposable income imposed under the notorious bankruptcy reform amendment.  In chapter 13 the debtor proposes a plan to the court for payment of debts and retention or surrender of certain assets.  The plan lasts for a period between three years and five years in length and involves monthly payments through convenient payroll deduction. 


A common misconception is that chapter 13 requires payment of unsecured debt, when in fact, many chapter 13 cases do not pay any money to unsecured claims.  A chapter 13 case can be cheaper than a chapter 7 when unsecured debt is discharged without payment and secured vehicle loans are reduced to a favorable interest rate close to the prime rate as opposed to a higher retail interest rate.  Each case is different based on the amount of assets, amount of debt and the income and expenses of the debtor. 


What worked for Uncle Joe may not apply to everyone.  And one person could pay less through a chapter 13 than another person who files chapter 7.  It takes a complete evaluation of one's financial situation to determine the best course, and that can only be done through an in office interview and examination of income, expenses, assets and debts.  Because a case lasts for years instead of months, the attorney fees are based upon the amount of work performed during that time.  An experienced attorney is essential to a successful journey through bankruptcy court.